This week the Justice Department reached an antitrust settlement with the National Association of Realtors that is meant to spur competition and bring down the standard 6% commission that comes with each real estate transaction. Basically, the NAR is no longer able to withhold the information on multiple listing services from discount online brokers such as Redfin and ZipRealty. Will consumers like us see a huge deduction in real estate transaction prices soon?
For more visit Wisebread
Friday, May 30, 2008
Thursday, May 29, 2008
Foreclosures and Sinking Prices...
Foreclosures and sinking prices maybe what it takes to rebound the housing slump, but it will not be anytime soon that is for sure.
Robert Sheridan of RISMedia, states that "We’re in a mess of our own making and it’s time to own up to it. Prices need to fall, credit needs to flow (more responsibly this time) and everyone - from homeowners to industry professionals - needs to lower their short-term expectations. We won’t be hearing any good news until we come to grips with the bad. We’ll get through this, of course, and the cycle will start again. When it does, I hope hindsight makes us much, much wiser."
The truth is that many are not wanting to see prices fall for another two years, but it may take that long for a turnaround, and I think that this crunch will make us "much, much wiser," and something good will come out of this mess. People who I talk to, who are not actively involved in the real estate industry, claim that it will bounce back fast, and we have already seen the worst; yet they miss the signs, decreasing home prices each month, and increasing activity of foreclosures.
Yet decreasing home prices, and increasing foreclosures, might be what jet starts the home market once more, argues a news article from Bloomberg. "In some regions, such as San Francisco, sinking prices may already may be helping the housing market recover." Banks do not want to hold on to the properties, so they put it on the market very quickly, and with that comes low prices that will help the market adjust.
Robert Sheridan of RISMedia, states that "We’re in a mess of our own making and it’s time to own up to it. Prices need to fall, credit needs to flow (more responsibly this time) and everyone - from homeowners to industry professionals - needs to lower their short-term expectations. We won’t be hearing any good news until we come to grips with the bad. We’ll get through this, of course, and the cycle will start again. When it does, I hope hindsight makes us much, much wiser."
The truth is that many are not wanting to see prices fall for another two years, but it may take that long for a turnaround, and I think that this crunch will make us "much, much wiser," and something good will come out of this mess. People who I talk to, who are not actively involved in the real estate industry, claim that it will bounce back fast, and we have already seen the worst; yet they miss the signs, decreasing home prices each month, and increasing activity of foreclosures.
Yet decreasing home prices, and increasing foreclosures, might be what jet starts the home market once more, argues a news article from Bloomberg. "In some regions, such as San Francisco, sinking prices may already may be helping the housing market recover." Banks do not want to hold on to the properties, so they put it on the market very quickly, and with that comes low prices that will help the market adjust.
Wednesday, May 28, 2008
Apartment Management Discovers a "Must Have" Tool for Property Management
XAP Realty, a Los Angeles based real estate marketing company has created a lead capture solution to utilize the fact that cell phones are now carried by all prospective buyers and renters. The concept is extremely simple, www.xaprealty.com provides real estate agents, individual sellers, and property management companies with interactive signs. The signs allow prospects to request the listing information of a particular property by sending a text message. the prospect is instantaneously sent the listing details including: address, price, beds, baths, acreage, amenities, contact information, and more. Simultaneously, the agent or property manager is sent an email that includes the prospects phone number and the listing that he/she is interested in viewing. The service acts like an on-site assistant, reporting full property details and taking down new lead information 24 hours a day 7 days per week. Paul Warkenting of KAMAP Property Management says, "The service increased our monthly number of leads, and brought us more business because it shows our commitment to customer service."
If this new, intriguing service could benefit you, then go over to their website right now and check it out.
If this new, intriguing service could benefit you, then go over to their website right now and check it out.
Wednesday, May 21, 2008
Apartment smoking bans. Good idea?
Recently we had an article about smoking in apartments, and now I found a survey on Lansner on Real Estate from the OCRegister that shows what the actually tenants think about putting a ban on smoking in an apartment complex. Write in to us and tell us what you think.
Apartments.com’s latest tenant survey says renters — even those who don’t smoke — aren’t that crazy about smoking bans.
Of those surveyed, 44.7% opposed the idea of making smoking in apartments illegal while 39.1% supported a ban. Nearly two-thirds of those surveyed — 61.9% — were non-smokers.
About a third of the respondents — 31.8% — said a property management company shouldn’t decide that you can’t smoke in the privacy of your own apartment. Another 22.2% didn’t mind people smoking in their own place as long as it didn’t affect them.
Apartments.com’s latest tenant survey says renters — even those who don’t smoke — aren’t that crazy about smoking bans.
Of those surveyed, 44.7% opposed the idea of making smoking in apartments illegal while 39.1% supported a ban. Nearly two-thirds of those surveyed — 61.9% — were non-smokers.
About a third of the respondents — 31.8% — said a property management company shouldn’t decide that you can’t smoke in the privacy of your own apartment. Another 22.2% didn’t mind people smoking in their own place as long as it didn’t affect them.
Tuesday, May 20, 2008
Deadbeat Homeowners Hit The Road
New article from Forbes.com
There was a time in America when losing your home to the mortgage lender was about the worst financial calamity that could befall a person. Not only were you homeless, your dignity was trampled by the repossession of your property.
That was Norman Rockwell. This is now.
To the distress of many banks and investors, American borrowers are increasingly viewing voluntary foreclosure as a practical financial decision, stripped of its taboo. Perhaps a bigger problem is that banks don't want to talk about the problem and they don't appear to know what to do about it. As long as it persists, there will be downward pressure on home prices, especially in overbuilt markets where the supply of housing already outstrips demand.
For the homeowners, the problem is a combination of falling real estate prices and the end of low-cost teaser periods on their mortgages. Those who bought at the crest of the market are finding their mortgages worth more than their homes. Faced with payments they can't afford and houses they have no stake in, these people are just hitting the road. Though difficult to statistically isolate, there is evidence pointing to the trend.
In March, according to foreclosure database RealtyTrac, foreclosures rose 54.0% year-over-year, but bank repossessions surged at double that rate, 129.0%. What accounts for the difference? Rick Sharga, vice president of marketing at RealtyTrac, said most March repossessions likely involved walkaways: homeowners who simply mailed their keys to the bank and moved. There was no need for the banks to foreclose.
In mid-April, Chief Risk Officer Don Truslow of Wachovia acknowledged the troubling trend during a conference call: "I don't know where the tipping point is, but somewhere when a borrower crosses the 100.0% loan-to-value, somewhere north of that . . . their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up."
Even more disconcerting, Truslow added that the trend was "almost regardless" of borrowers' creditworthiness. Lender's are beginning to report that loan-to-value ratios are better indicators of the likelihood of default than borrowers' FICO scores, a widely used metric of creditworthiness developed by Fair, Isaac. (See "Subprime In Sheep's Clothing")
But Wachovia doesn't have a plan to deal with the phenomenon.
"We are concerned about the issue, we just don't have a strategy yet," said Don Vecchiarello, a spokesperson for Wachovia (nyse: WB - news - people ). "We are monitoring the walkaway phenomenon and if the issue persists we will develop a strategy around it."
Banks won't come out and say how many walkaways they are seeing month after month, but most will offer anecdotal evidence of the trend. The unusual element of walkaways in this cycle that banks will acknowledge is that borrowers with relatively good credit files are opting to exit their mortgage agreements.
Washington Mutual (nyse: WM - news - people ) isn't in much better shape. "In short, we don't break out walkaways or provide any metrics on them," said Derek Aney, a company spokesperson. Aney added that the bank "acknowledges the phenomenon and manages it as part of its overall loss-mitigation activities."
If it's in a lender's best interest to simply claim the property and cancel the mortgage debt, it will accept the deed in lieu of foreclosure and write down the difference between the current value of the home and the remaining mortgage. RealtyTrac's Sharga said that deeds in lieu are actually better for both the lender and the borrower.
For borrowers, the process is slightly less severe than a foreclosure on their credit records. Also, the bank essentially agrees not to pursue any further payments. For the lender, there are savings in not going through the auction process. This is expecially true if the home has lost value, as is often the case in today's market. There's also the relative ease of process relative to the time and expense of a lengthy foreclosure proceeding or the potential of the owner suddenly abandoning the home.
Thomas Kerrigan, a real estate lawyer in New York, said that if a borrower has other assets besides the home, than there is a much greater likelihood that the lender will pursue the deficiency between the total mortgage and the depreciated home price. However, if the lender believes there are no other assets, it will likely make a business decision that it isn't worth trying to recoup the loss. "You can't," Kerrigan noted, "get blood out of a stone."
Kerrigan also said that that foreclosure law varies from state to state and that banks will have to develop their walkaway strategies accordingly. States with judicial foreclosures, which emphasize homeowner rights, have the most cumbersome procedures. Lenders luck out in non-judicial states like California where foreclosure is a relatively speedy process. Walkaways would probably prefer judicial states because they can camp out in their homes while the banks spend up to a year trying to foreclose.
"It really is a moral dilemma, because it's wrong, but the repercussions are credit-based," said Nancy Flint-Budde, a certified financial planner in Salem, New York. "Destroyed credit is a still huge deterrent, but if someone is willing to throw their credit score away for seven years then walking away is an option." Negative credit items are typically deleted from consumers' reports after seven years.
Because many people "went in as investors," rather than homeowners, "they went in with a different mindset and might be willing to just walkway." Flint-Budde added, "This is why traditionally people had to put more money down when they borrowed money for a second home or investment property."
Glen Costello, a structured finance officer at Fitch, said that walkaways are nothing new, but this cycle's factors are. "One could understand that if someone had lost their job and all their savings, they were being forced to give up their home," said Costello. Now, however, homeowners aren't as much vulnerable to foreclosure as amenable. They just don't want to pay high monthly costs for properties in which they do not have stakes.
There was a time in America when losing your home to the mortgage lender was about the worst financial calamity that could befall a person. Not only were you homeless, your dignity was trampled by the repossession of your property.
That was Norman Rockwell. This is now.
To the distress of many banks and investors, American borrowers are increasingly viewing voluntary foreclosure as a practical financial decision, stripped of its taboo. Perhaps a bigger problem is that banks don't want to talk about the problem and they don't appear to know what to do about it. As long as it persists, there will be downward pressure on home prices, especially in overbuilt markets where the supply of housing already outstrips demand.
For the homeowners, the problem is a combination of falling real estate prices and the end of low-cost teaser periods on their mortgages. Those who bought at the crest of the market are finding their mortgages worth more than their homes. Faced with payments they can't afford and houses they have no stake in, these people are just hitting the road. Though difficult to statistically isolate, there is evidence pointing to the trend.
In March, according to foreclosure database RealtyTrac, foreclosures rose 54.0% year-over-year, but bank repossessions surged at double that rate, 129.0%. What accounts for the difference? Rick Sharga, vice president of marketing at RealtyTrac, said most March repossessions likely involved walkaways: homeowners who simply mailed their keys to the bank and moved. There was no need for the banks to foreclose.
In mid-April, Chief Risk Officer Don Truslow of Wachovia acknowledged the troubling trend during a conference call: "I don't know where the tipping point is, but somewhere when a borrower crosses the 100.0% loan-to-value, somewhere north of that . . . their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up."
Even more disconcerting, Truslow added that the trend was "almost regardless" of borrowers' creditworthiness. Lender's are beginning to report that loan-to-value ratios are better indicators of the likelihood of default than borrowers' FICO scores, a widely used metric of creditworthiness developed by Fair, Isaac. (See "Subprime In Sheep's Clothing")
But Wachovia doesn't have a plan to deal with the phenomenon.
"We are concerned about the issue, we just don't have a strategy yet," said Don Vecchiarello, a spokesperson for Wachovia (nyse: WB - news - people ). "We are monitoring the walkaway phenomenon and if the issue persists we will develop a strategy around it."
Banks won't come out and say how many walkaways they are seeing month after month, but most will offer anecdotal evidence of the trend. The unusual element of walkaways in this cycle that banks will acknowledge is that borrowers with relatively good credit files are opting to exit their mortgage agreements.
Washington Mutual (nyse: WM - news - people ) isn't in much better shape. "In short, we don't break out walkaways or provide any metrics on them," said Derek Aney, a company spokesperson. Aney added that the bank "acknowledges the phenomenon and manages it as part of its overall loss-mitigation activities."
If it's in a lender's best interest to simply claim the property and cancel the mortgage debt, it will accept the deed in lieu of foreclosure and write down the difference between the current value of the home and the remaining mortgage. RealtyTrac's Sharga said that deeds in lieu are actually better for both the lender and the borrower.
For borrowers, the process is slightly less severe than a foreclosure on their credit records. Also, the bank essentially agrees not to pursue any further payments. For the lender, there are savings in not going through the auction process. This is expecially true if the home has lost value, as is often the case in today's market. There's also the relative ease of process relative to the time and expense of a lengthy foreclosure proceeding or the potential of the owner suddenly abandoning the home.
Thomas Kerrigan, a real estate lawyer in New York, said that if a borrower has other assets besides the home, than there is a much greater likelihood that the lender will pursue the deficiency between the total mortgage and the depreciated home price. However, if the lender believes there are no other assets, it will likely make a business decision that it isn't worth trying to recoup the loss. "You can't," Kerrigan noted, "get blood out of a stone."
Kerrigan also said that that foreclosure law varies from state to state and that banks will have to develop their walkaway strategies accordingly. States with judicial foreclosures, which emphasize homeowner rights, have the most cumbersome procedures. Lenders luck out in non-judicial states like California where foreclosure is a relatively speedy process. Walkaways would probably prefer judicial states because they can camp out in their homes while the banks spend up to a year trying to foreclose.
"It really is a moral dilemma, because it's wrong, but the repercussions are credit-based," said Nancy Flint-Budde, a certified financial planner in Salem, New York. "Destroyed credit is a still huge deterrent, but if someone is willing to throw their credit score away for seven years then walking away is an option." Negative credit items are typically deleted from consumers' reports after seven years.
Because many people "went in as investors," rather than homeowners, "they went in with a different mindset and might be willing to just walkway." Flint-Budde added, "This is why traditionally people had to put more money down when they borrowed money for a second home or investment property."
Glen Costello, a structured finance officer at Fitch, said that walkaways are nothing new, but this cycle's factors are. "One could understand that if someone had lost their job and all their savings, they were being forced to give up their home," said Costello. Now, however, homeowners aren't as much vulnerable to foreclosure as amenable. They just don't want to pay high monthly costs for properties in which they do not have stakes.
Thursday, May 15, 2008
$100 prize
Just reminding everyone of the promotion Apartment Management is offering. Write an article, less than 1,500 words, about your experience in the apartment industry. It can be about anything, it is totally up to you. All it has to be is interesting, and if yours is picked, then you will get a $100 American Express gift card.
Just make sure you send your submissions to editor@aptmags.com by the end of June.
Just make sure you send your submissions to editor@aptmags.com by the end of June.
Secondhand Smoke in Apartments
A guide for owners and managers by The American Nonsmokers' Rights Foundation
"Secondhand smoke is the third leading cause of preventable death in the United States. Approximately 70,000 people die annually from diseases caused by secondhand smoke, with hundreds of thousands more suffering ill effects from exposure. Multi-unit dwellings present a particular challenge for dealing with this significant health and nuisance problem. Tobacco smoke from one unit may seep through cracks, be circulated by a shared ventilation system, or otherwise enter the living space of another. You may wonder what you can do to mitigate some of these problems."
Improved Ventilation May Not Solve the Problem
Standards cannot ensure the avoidance of adverse health effects from tobacco smoke. Yet if you improve the system with fresh air intake, installing better filters, and limit amount of air exhausted from one unit to another, it can help
Work Creatively with Tenants toward a Solution
Work with tenants, and show them the effects of their habits, and how their lease agreement prevent them from engaging in behaviors that interferes with other tenants enjoyment.
To Completely Solve the Problem, Eliminate Smoking
There is no constitutional or legal right to smoke. You can make policies that are phased in gradually with new leases "containing a clause that prohibits smoking both indoors and on all grounds."
There are many reasons to implement non-smoking policies, so check out the editorial by ANRA, and contact them to see what you can do to cut down on all the preventable deaths caused by second hand smoking.
"Secondhand smoke is the third leading cause of preventable death in the United States. Approximately 70,000 people die annually from diseases caused by secondhand smoke, with hundreds of thousands more suffering ill effects from exposure. Multi-unit dwellings present a particular challenge for dealing with this significant health and nuisance problem. Tobacco smoke from one unit may seep through cracks, be circulated by a shared ventilation system, or otherwise enter the living space of another. You may wonder what you can do to mitigate some of these problems."
Improved Ventilation May Not Solve the Problem
Standards cannot ensure the avoidance of adverse health effects from tobacco smoke. Yet if you improve the system with fresh air intake, installing better filters, and limit amount of air exhausted from one unit to another, it can help
Work Creatively with Tenants toward a Solution
Work with tenants, and show them the effects of their habits, and how their lease agreement prevent them from engaging in behaviors that interferes with other tenants enjoyment.
To Completely Solve the Problem, Eliminate Smoking
There is no constitutional or legal right to smoke. You can make policies that are phased in gradually with new leases "containing a clause that prohibits smoking both indoors and on all grounds."
There are many reasons to implement non-smoking policies, so check out the editorial by ANRA, and contact them to see what you can do to cut down on all the preventable deaths caused by second hand smoking.
Wednesday, May 14, 2008
Real Estate Management Among Top Jobs in U.S.
The Institute of Real Estate Management (IREM) recently wrote an article in our magazine that described the growth, and future, of real estate management jobs. They say that "career opportunities in real estate management are the best ever."
Here are some data that supports this argument:
-Last year, Money magazine and Salary.com ranked real estate management 23rd among the 'Best Jobs in America.'
-U.S. Bureau of Labor Statistics assessment of high-growth, high-wage occupations ranks real estate management 38th among the top 50 jobs that are growing faster than the average
-Spring 2007 issue of Selectleaders Job Barometer reports a 35% increase in commercial real estate job postings from February to April 2007, with real estate management second only to finance in postings.
IREM is "confident that demand for real estate managers will continue to grow due to the confluence of these two factors: (1) the unstoppable forces of demographics in the work force exacerbated by generational change, and (2) the market dynamics of real estate values as driven by new product development, interest rates, occupancy levels and cap rates."
If you want to know more, check out our magazine online at www.aptmags.com
Here are some data that supports this argument:
-Last year, Money magazine and Salary.com ranked real estate management 23rd among the 'Best Jobs in America.'
-U.S. Bureau of Labor Statistics assessment of high-growth, high-wage occupations ranks real estate management 38th among the top 50 jobs that are growing faster than the average
-Spring 2007 issue of Selectleaders Job Barometer reports a 35% increase in commercial real estate job postings from February to April 2007, with real estate management second only to finance in postings.
IREM is "confident that demand for real estate managers will continue to grow due to the confluence of these two factors: (1) the unstoppable forces of demographics in the work force exacerbated by generational change, and (2) the market dynamics of real estate values as driven by new product development, interest rates, occupancy levels and cap rates."
If you want to know more, check out our magazine online at www.aptmags.com
Tuesday, May 13, 2008
Newer O.C. apartments suffer more vacancies
Taken from the Lasner on Real Estate blog, posted by Mary Ann Millbourn
REIS Inc. reports that during the first quarter, O.C. apartments built after 1999 had 2.5 times the vacancy rate of the county as a whole.
Countywide vacancies were 4% in the 784 O.C. complexes that REIS studied. Units constructed after 1999, however, had a 10% vacancy rate. The oldest apartments — built before 1970 — had the fewest vacancies at 2.8%.
Rents made the difference. Apartments built before 1970 rented for $1,359 while those constructed after 1999 went for $2,055. The average county rent was $1,550.
Year Built Vacancy Rate
Before 1970 2.8%
1970-1979 3.2%
1980-1989 4.2%
1990-1999 3.6%
After 1999 10.0%
All 4.0%
REIS Inc. reports that during the first quarter, O.C. apartments built after 1999 had 2.5 times the vacancy rate of the county as a whole.
Countywide vacancies were 4% in the 784 O.C. complexes that REIS studied. Units constructed after 1999, however, had a 10% vacancy rate. The oldest apartments — built before 1970 — had the fewest vacancies at 2.8%.
Rents made the difference. Apartments built before 1970 rented for $1,359 while those constructed after 1999 went for $2,055. The average county rent was $1,550.
Year Built Vacancy Rate
Before 1970 2.8%
1970-1979 3.2%
1980-1989 4.2%
1990-1999 3.6%
After 1999 10.0%
All 4.0%
Thursday, May 8, 2008
Apartment resident safety
Apartment.com has some helpful tips for resident dwellers. It is important for apartment managers to make sure the tenants are safe, and feel secure in their own apartment complex. Here are some tips that managers should tell their tenants, and make sure the units in their care will be a safe place, and keep their tenants happy, because tenants will pick up and move if they feel unsafe in their own home.
Our biggest “mom” tip is to purchase renter’s insurance to protect your valuables. Even with insurance you still need to take steps to protect yourself. Here are some other easy ways to make you, your apartment and your belongings much safer.
Do…
* Write only your last name or initials on your mailbox.
* Although you may have to pay a small fee, it’s a good idea to have an unlisted phone number for safety reasons. Having an unlisted number will also cut down on solicitation calls.
* Make sure the locks on all doors leading into your apartment have been changed since the last tenant was living there. You may need to make copies of your keys for roommates but most apartment owners forbid copies made for anyone not living in the apartment. This includes your best friend, boy/girlfriend and parents. For safety reasons, keep copies of keys in your hands only.
* Apartment doors should all have peephole viewers. If you don’t have one, ask your landlord to install one.
* On the elevator, avoid riding alone with a stranger. If you get stuck with someone you do not know, stand near the control panel so you can exit in an emergency or if the stranger makes you feel uncomfortable in any way.
* Stay alert when entering your apartment. Don’t talk on your cell phone or look preoccupied when walking toward your building. Criminals look for a weak target and are more likely to pass up someone who appears focused, aware and strong.
* Report bad lighting or overgrown shrubbery to your landlord. You are never being too picky when it comes to your safety.
* Inventory the description, serial number and cost of your valuables. Keep a copy of your records online, in a fire-proof locked box or in a safe deposit box in a bank. Take pictures of your most valuable items and attach those to your receipts to make any insurance claims run as smoothly as possible.
* Keep a broom handle or other long stick in the track of sliding glass doors. This may deter a break in.
* Purchase light timers and set them so that your lights turn on when you’re away from home in the evening.
* Take in your newspaper and packages on a daily basis.
Our biggest “mom” tip is to purchase renter’s insurance to protect your valuables. Even with insurance you still need to take steps to protect yourself. Here are some other easy ways to make you, your apartment and your belongings much safer.
Do…
* Write only your last name or initials on your mailbox.
* Although you may have to pay a small fee, it’s a good idea to have an unlisted phone number for safety reasons. Having an unlisted number will also cut down on solicitation calls.
* Make sure the locks on all doors leading into your apartment have been changed since the last tenant was living there. You may need to make copies of your keys for roommates but most apartment owners forbid copies made for anyone not living in the apartment. This includes your best friend, boy/girlfriend and parents. For safety reasons, keep copies of keys in your hands only.
* Apartment doors should all have peephole viewers. If you don’t have one, ask your landlord to install one.
* On the elevator, avoid riding alone with a stranger. If you get stuck with someone you do not know, stand near the control panel so you can exit in an emergency or if the stranger makes you feel uncomfortable in any way.
* Stay alert when entering your apartment. Don’t talk on your cell phone or look preoccupied when walking toward your building. Criminals look for a weak target and are more likely to pass up someone who appears focused, aware and strong.
* Report bad lighting or overgrown shrubbery to your landlord. You are never being too picky when it comes to your safety.
* Inventory the description, serial number and cost of your valuables. Keep a copy of your records online, in a fire-proof locked box or in a safe deposit box in a bank. Take pictures of your most valuable items and attach those to your receipts to make any insurance claims run as smoothly as possible.
* Keep a broom handle or other long stick in the track of sliding glass doors. This may deter a break in.
* Purchase light timers and set them so that your lights turn on when you’re away from home in the evening.
* Take in your newspaper and packages on a daily basis.
Wednesday, May 7, 2008
Check out this real estate blog
Pied Piper Speaks:
Since 2005, Pied Piper Speaks On Real Estate has been a recognized real estate blog leader, providing literally thousands of North America's finest agents with the kind of creative, dynamic, effective and powerful marketing ideas they need to survive and succeed in the fiercely competitive arena of real estate.
Since 2005, Pied Piper Speaks On Real Estate has been a recognized real estate blog leader, providing literally thousands of North America's finest agents with the kind of creative, dynamic, effective and powerful marketing ideas they need to survive and succeed in the fiercely competitive arena of real estate.
Friday, May 2, 2008
Real estate contest
We are pleased to announce that we were allowed to enter into a contest hosted by FHA Mortgage Center. They are holding a contest for blogs about the real estate industry, and I decided to enter the Apartment Management blog, and see what damage we could do. It would be awesome if you could support us and vote for our blog. Thanks.
Thursday, May 1, 2008
Taxpayer Wins Victory in Wealth Transfer Case
New article by Michael Trainotti
On March 26, 2008 the IRS lost a major case in the tax court dealing with family wealth transfers not being included in the decedent’s estate. As will be discussed below, the tax court found that there was a sufficient business non tax purpose in creating a LLC to manage family assets for the next generation and making lifetime gifts into trusts. This is a very important point in the successful outcome against the IRS.
Facts of Case. Decedent and her physician husband had a long history of having and encouraging a close knit family, having three daughters and regularly taking an annual family vacation which included family meetings considering business and investment matters and often involving accountants and attorneys as invitees. Dr. Mirowski had been developing an implantable defibrillator device and to pursue its development and funding, the family moved to the U.S. in 1968, and within 10 years Dr. Mirowski was successful in developing an implantable cardioverter defibrillator(ICD) thereafter achieving success with implantation in humans.
Mrs. Mirowski at all times was an astute and involved financial manager, as stated by the court, "a careful,
deliberate and thoughtful decision maker, especially with respect to financial matters." She worked with an investment advisor at Goldman Sachs to handle a rapidly growing investment portfolio, eventually agreeing to the principle of diversification, and in early 2001 consolidated all investments with Goldman Sachs.
The concept of using an investment entity, here a limited liability company (LLC), as a vehicle for pooling of family assets first came up during a presentation to decedent by U.S. Trust.
The LLC documents were finalized following the August 14, 2001 meeting, and now, beginning at page 18 of the Tax Court's opinion, the findings of fact chronicle the purposes of the LLC, the steps in formation and funding, the gifts by the initial sole member, the decedent, of 16% interests in the LLC to each of the daughter's trusts, all leading up to the sudden September 10, 2001 deterioration of decedent's health and her death the next day, the infamous 911 tragedy.
1. Joint management of the family's assets by her daughters and eventually her grandchildren,
2. Maintenance of the bulk of the family's assets in a single pool of assets in order to allow for investment opportunities that would not be available if Ms. Mirowski were to make a separate gift of a portion of her assets to each of her daughters or to each of her daughters' trusts, and
3. Providing for each of her daughters and eventually each of her grandchildren on an equal basis.
Decedent retained outside MFV significant assets, totaling $7.5 million in overall value, of which over $3 million was in liquid form. The court found that there was no express or implied agreement that any LLC distributions would be made to allow decedent to pay gift tax on the gifts of MFV interests. Decedent had substantial liquid assets in her name, the LLC was mandated to make annual distributions of net cash flow, and decedent could have borrowed as needed to pay the gift tax due.
Then the court turned to the gifts by decedent of a 16% MFV interest to each of the three daughters' trusts.First, no express retained income or enjoyment retention under 2036(a)(1) was found by the Tax Court. The IRS contended that since decedent was the managing member (General Manager) of MFV, her authority "included the authority to decide the timing and amounts of distributions from MFV."
Not so, said the court, pointing to the operating agreement and State law limitations on such General Manager authority. As to the operating agreement, the provisions regarding annual mandated distributions, the required distributions of capital asset disposition proceeds (including in liquidation, etc.) were significant limitations on the General Manager's authority, couple with general fiduciary duties.
Fire Safety Part 2
The Santa Ana winds can bring about fires faster than any fire squad can contain them, so it is best be prepared to deal with them efficiently and to ensure none of your tenants is hurt. Here is some more precautions and what to do once a fire is in the apartment. It comes from phoenix.gov:
Tips for living safely in apartment buildings or mobile home communities:
- Make sure you have smoke alarms that work.
The Fire Code requires working smoke alarm(s) in every apartment unit/mobile home. Existing apartments/mobile homes require smoke alarms in the hallway outside sleeping areas. Newly constructed apartments/mobile homes now require them IN the sleep room, as well. Remember to check the batteries once a month, and replace the batteries once a year. - The apartment/mobile home complex is required to have a fire extinguisher within 75-feet travel distance.
If extinguishers are not provided outside the apartments/mobile homes, then each apartment/mobile home is required to have one. - The Fire Code states that no person shall use fixed or portable barbecues in or under any attached covered patios, balconies, covered walkways or roof overhangs.
When in use, barbecues should be located on ground level and be a minimum of 5-feet from buildings, structures, covered walkways or roof overhangs. - Don’t park in front of fire hydrants and don’t park in fire lanes.
Respecting the fire restrictions may literally save your life. When friends visit, be sure to remind them to park only in appropriate parking areas. - Never leave smoking materials burning. Never smoke in bed.
In 2001, the most common cause of apartment/mobile home fires was careless disposal of smoking materials. - Have a fire escape plan. Practice it.
Know at least two ways to get out of your apartment/mobile home. Pick a family meeting place outside the apartment building/mobile home. Don’t use elevators (they may take you right into the fire.) - Make sure there’s a number on your apartment/mobile home door.
If there isn’t, contact management. - Keep a copy of your apartment/mobile home number and apartment building number, inside your apartment/mobile home, near the phone.
The information will then be handy for babysitters, and it will be there if you panic. - Complex owners and managers need to be sure gated driveways are accessible to firefighters.
75-percent of multi-housing complexes and mobile home communities are now gated. Work with the fire department to make sure access and requirements are met. - Don’t run extension cords under carpets or from unit-to-unit.
They can easily overheat. Extension cords are for temporary use only. They are not to be used as a substitute for permanent wiring. - Get acquainted with the elderly folks in your building or community.
If there’s a fire, they may have extra difficulty getting out. You may be able to help them, or you can direct firefighters to the elderly person’s apartment/mobile home.
What to do if there’s a fire
- Get out of the apartment.
- Once out – STAY OUT! Do not go back in for ANY reason.
- Call 9-1-1 from a safe location.
- Give the dispatcher as much accurate information as you can.
- Use your fire escape plan. Go to the designated family meeting place.
- Try to let neighbors know to get out. Help elderly folks or families who have many children.
- Have someone meet the fire trucks when they arrive, if it can be done safely.
- Keep the fire lanes open.
- If you can’t get out, use a mobile phone to stay in touch with 9-1-1 dispatchers. Shine a flashlight or wave a sheet out the window to alert firefighters that you’re trapped.
- Stay calm.
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